PMS: What Is a Fund Manager? And Its key responsibilities

What Is a Fund Manager?

A fund manager is a financial professional who is responsible for overseeing and managing an investment fund. They make investment decisions on behalf of the fund’s investors, with the goal of achieving the fund’s stated objectives. These objectives can vary depending on the type of fund, but they often include maximizing returns, minimizing risk, or a combination of both.

There are many different types of fund managers, each with their own area of expertise. Some common types include:

  • Mutual fund managers: These managers oversee mutual funds, which are pools of money that are invested in a variety of assets, such as stocks, bonds, and real estate.
  • PMS fund managers: Portfolio Manager, is an investment portfolio in stocks, fixed income, debt, cash, structured products and other individual securities.
  • Hedge fund managers: These managers oversee hedge funds, which are investment funds that are not subject to the same regulations as mutual funds. This allows them to use more complex investment strategies, but also comes with higher risks.
  • Pension fund managers: These managers oversee pension funds, which are pools of money that are used to provide retirement benefits to employees.
  • Private equity fund managers: These managers oversee private equity funds, which are investment funds that invest in the equity of privately held companies.

Fund managers typically have a team of analysts and traders who help them with their research and investment decisions. They also work with compliance officers to ensure that the fund is operating in accordance with all applicable laws and regulations.

Here are some of the key responsibilities of a fund manager:

  • Developing and implementing an investment strategy: This involves setting the fund’s objectives, researching potential investments, and making decisions about which assets to buy and sell.
  • Managing risk: Fund managers need to be aware of the risks associated with different investments and take steps to mitigate those risks.
  • Reporting to investors: Fund managers are required to provide regular reports to investors on the performance of the fund.
  • Following the law: Fund managers must comply with all applicable laws and regulations.

Being a fund manager is a challenging but rewarding career. It requires a strong understanding of financial markets, as well as the ability to make sound investment decisions under pressure.

Guidelines for Investing in PMS

There are certain guidelines to follow to invest in PMS. It is important to adhere to it as an investor while looking for the best portfolio management companies:

  • We suggest a 3-year horizon for all your investments, because we believe in long term investing. We do not frequently churn your portfolio.
  • We review the portfolio on daily basis, but we suggest removal and addition of scrip’s only when there is a major change in the company’s outlook. This is generally once a year.
  • Based on your risk profile you may select the various strategy that we presently have.
  • We provide PMS services only on Discretionary basis. That means we will select the companies for in investment on your behalf, you may opt for the strategy based on your risk appetite but the final selection of company will be done by our research department and decision will take by fund manager.
  • Please note past performance does not guarantee future performance.
  • Stock market investments are subject to market price fluctuation risk.
  • We have appointed Axis Bank Ltd —as our custodian for funds and custodian for shares is LBPL. You have to open a Depository account with Libord Brokerage Pvt. Ltd.
  • We have designated a system that will explain the Portfolio performance on quarterly basis.
  • Minimum funds to be invested as required by SEBI is Rs. 50 lakhs.

PMS Fees Structure

We have 2 fee options available. Clients can opt for any 1 of the following 2 models:

  • Fixed Fee Model –Charged as a % of AUM on a daily NAV basis and deducted quarterly.
  • Performance Fee Model – A smaller portion of the fee is charged (similar to the Fixed Fee Model). Another portion is charged as a % of returns in excess of the hurdle rate (at present 10%), payable quarterly based on the profits on pro-rata basis. Charged on Notional Profit with high watermark applicable

Regulatory Oversight

  • Securities and Exchange Board of India has prescribed specific regulations for monitoring the performance of a Portfolio Manager.
  • A company desirous of providing PMS service must be registered with SEBI.
  • There is a minimum net worth of Rs 5 crores, for the Portfolio Manager who have registered before 16th January, 2020. Portfolio Manager cannot guarantee any minimum returns to the custom.
  • Minimum amount that can be invested in PMS strategy is Rs. 50 lakhs.
  • Half Yearly returns & AUM certified by auditors are filed with SEBI.
  • The Disclosure document that is signed with the customer is also filed with SEBI.
  • SEBI does not guarantee safety of money of the customers, all it does is prescribe guidelines to ensure that the fund manager works within a tight set of rules.
  • SEBI issues guidelines from time to time strengthening the regulatory framework of relationship between the Portfolio Manager and his customers.

Taxation and PMS

Tax for the PMS investment is to be paid as per applicable laws as per current laws Dividends are subject to tax. You may consult your financial consultant/tax consultant for filing of Income tax returns.